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Oct 21 Premier League's International Broadcasting Rights

In early October, the Premier League clubs’ top executives gathered in London to discuss the economic impact that upcoming multi-billion-pound international broadcast rights arrangements may have on the league in the coming years. At this meeting, the Premier League’s Executive Chairman, Richard Scudamore, unsuccessfully proposed a plan for the Premier League to change the way in which its clubs share income from top flight overseas broadcasting deals.

Given that the round of bidding for PL broadcasting rights for the next cycle (2019/20 season - 2021/22 season) is set to take place before the end of the year, a variety of questions remain concerning the future of the Premier League, as the next proposed meeting of Club bosses in November could arguably be the most important meetings in the Premier League’s history.

Before the rejected proposal is looked at in detail, its important to have a good understanding of the Premier League’s broadcast rights cycle, and the increasing impact domestic and overseas broadcasting rights arrangements are having on Premier League club revenues in the modern era.

Traditionally, broadcasting deals have been enveloped into 3 year cycles; the most recent cycle commenced at the start of the 2016/2017 season. Media companies around the world pay the Premier League to reserve the right to broadcast live matches both domestically and abroad.

Because the Premier League has projected a consistent brand image with broad commercial appeal much longer than its European counter-parts, a fiercely competitive pay TV market has emerged since the league’s foundation in 1992.

Sky & BT currently pay the Premier League a combined £1.7 billion per season for the domestic broadcast rights for the 2016/2019 cycle. This is an absurd amount considering that back in 1992, BSkyB secured the exclusive domestic rights to the Premier League over 5 years for a mere £191 million, which was essential to BSkyB’s survival as an organisation at the time.

This graph shows the extent to which Premier League’s TV income has grown over the past 2 decades.

The £5.136bn sale of Premier League domestic TV rights for 2016/2019 was a 71% increase on the previous cycle, and grants Sky (126 games) and BT (42 games) the right to broadcast a total 168 live games each season. The cost then to broadcast a single Premier League game in this cycle is £10.19 million.

Premier League Broadcasting Revenue Distribution

Considering how much the Premier League is raking in from selling broadcasting rights domestically, you’re probably wondering how exactly the league distributes this money amongst its members?

Well, the Premier League maintains a similar revenue distribution model to most of its European counterparts, with domestic broadcast revenue distributed amongst its members as such - equal distribution (50%), merit payments (25%) and club facility fees (25%). The league uses a relatively low first-to-last ratio; in 2016/2017 season the first-to-last ratio was slightly above 1.6:1 (compared to La Liga’s 4:1 first-to-last ratio from 2015/2016 season).

The breakdown of Payments to Clubs released by the Premier League. Notice how the Overseas TV segment here is the largest payment received by clubs in 2016/2017.

What differentiates the Premier League from other top flight leagues is its interpretation of merit payments (25%) & club facility fees (25%). Unlike in other European leagues, PL merit payments only take into account league position that season (ie. no previous seasons), and facility fees are simply defined by the number of times a team is broadcast. Other leagues also take into account metrics like viewership figures when it comes to club standing, so in this sense, the Premier League promotes greater equality in its competition through its domestic revenue distribution model.

International Broadcasting Rights

In the modern era of football and big business, domestic broadcasting revenues are only half of the story for the Premier League and its members. In an increasingly globalised sport & entertainment industry, the ability to consistently generate revenues in overseas markets will be paramount to a league’s ongoing success.

The Premier League’s current popularity on the global stage is unrivalled, given that they dominate markets in Asia & North America. For the 16/17 - 18/19 broadcasting cycle, the Premier League will generate approximately £3.2 billion from foreign broadcasters.

International PL Broadcasting Income Per Season (£ Billion)

Given the drastic growth in international rights fees since the Premier League’s inception, it is important to remember that as it stands, all international broadcast income is distributed evenly amongst the division’s twenty clubs.

As shown above, last season Overseas TV deals saw each Premier League team earn £39,090,596.

But despite the Premier League securing lucrative deals for the 16/17 - 18/19 broadcast cycle, new contracts for international markets for the 19/20 - 21/22 cycle have already been wrapped up for twice as much money.

For 2016 - 2019, SSMG are paying the Premier League £13 million per season to broadcast matches in China. For the 2019 - 2022 cycle, digital firm PPTV will pay £180 million per year to broadcast in the region.

Similarly, the main sports broadcaster in Sub-Saharan Africa, Supersport, recently agreed to pay £168m per year to broadcast the Premier League in their region. Thats double the £84 million a year they pay for the current cycle.

In a slightly different situation, American giants NBC are paying £128 million per season through 2022 in a 6 year deal worth twice as much as the previous one.

Altogether, the Premier League currently makes £1.07 billion a year from overseas broacasting deals. As of 2019 and the advent of a new broadcast cycle, three regions: China, USA & Subsaharan Africa will be paying £476 million a year - almost half the amount earned by the PL from broadcasting worldwide in the previous cycle.

The league is currently shown in 212 territories, with a potential audience of 4.7 billion people - it comes at no surprise that new contracts for international markets are currently booming in value for both the EPL, and the other major leagues in Europe. Deloitte’s Annual Review of Football Finance 2017 estimates that c.80% of projected total revenue growth of Europe’s ‘big five’ leagues between 2015/16 and 2017/18 are attributable to new broadcasting rights arrangements. In a few years it is likely this proportion of Premier League income could grow dramatically while the domestic market fades away.

Negotiations for broadcasting rights of many other international regions are set to take place before the end of the year...

The Big 6 & Scudamore's Proposal

The increasing significance of international broadcasting rights to the league and its members brings us back to the meeting of club executives in London earlier this month. Currently all 20 teams evenly share the income from overseas broadcast payments, but the so-called Big 6 - Arsenal, Chelsea, Liverpool, Man City, Man U, Tottenham - believe they deserve a larger share. These clubs claim their global brands are whats driving the rise of the Premier League's foreign TV revenue and they have a point - they're the ones spending large sums of money engaging the foreign consumer with pre-season tours and marketing investments. Additionally, foreign audience fan-base is disproportionately in support for the Big 6 over smaller clubs in the league - I doubt there there are many fans down in Sub-Saharan Africa tuning in to watch Brighton vs Huddersfield on a Saturday afternoon.

With further negotiations for domestic and foreign broadcasting rights to take place before the end of the year, Richard Scudamore, the Premier League's Chairman, is attempting to find a compromise whereby the league's members maintain unity and ensure the league's long term success.

Scudamore unsuccessfully proposed that 35% of the overseas domestic rights pot be allocated according to final league position. He needed 14 out of the 20 clubs to agree for such a proposal to pass, but he was met with strong opposition. Many of the smaller clubs in the league rejected the proposal citing the fact that the Premier League's International Broadcasting Income is growing faster than Domestic Broadcasting Income, and that Scudamore's proposal will only increase the gap between the 'Big 6' and the remaining clubs in the league.

The smaller clubs argue that it is the Premier League's competitive balance that makes it so popular abroad and thus are pushing for a more egalitarian split of overseas broadcast income.

The meeting held in October was therefore unsuccessful and no compromise could be found on how the overseas broadcast revenues will be split in the future. But the fact that the discussion has merely been adjourned & will resume some time in November, there is still hope that a compromise can be found - we are however left wondering what sort of proposal Richard Scudamore is currently putting together. Will he propose a smaller percentage of overseas TV income be allocated to clubs based on league position, or does he have something entirely different in mind? How will the Big 6 react to negotiations in November, and will we see another stalemate heading into 2018?